The trade that is costing a packet

But, while the exodus may be bad news for our corner shops, John Dean visits a Belgian town where shopkeepers are doing a thriving trade, thanks to lower duties on tobacco.

THERE is not much to Adinkerke, a small town on the banks of a canal, close to the France-Belgian border. About the size of a large English village, its main interest is the graves, in the surrounding flatlands, of men who fell on Belgium's killing fields during two world wars.

And yet, unremarkable as Adinkerke may seem at first glance, it is familiar to a lot of people from the North-East of England - and represents a major threat to dozens of the region's corner shops.

The reason is that Adinkerke sells cut-price cigarettes - many millions of them - and each year significant numbers of people make the 800-mile round trip from the North-East by road, rail and sea to its shops.

Although many do so legitimately, taking advantage of low duty levels and laws which allow tobacco to be brought back for personal use, others import it to sell on the black market, according to Customs officers and tobacco industry investigators

The reason Adinkerke, and other places like it in Belgium, France, Spain and Luxembourg, are so attractive to shoppers is that the British Government imposes high tax levels on cigarettes and tobacco bought in Britain, to dissuade people from smoking on health grounds.

On the Continent, duties are much lower with the result that on average, 20 cigarettes cost £4.51 in the UK, whereas in Belgium they are £2.08, £2.53 in France, and as low as £1.27 in Spain.

Visit places like Adinkerke and you will see North-East favourites Regal and Lambert & Butler going for half the price of the UK: Golden Virginia tobacco, another favourite, costs £2.40 per 50g in Belgium, whereas in the UK, smokers could end up paying £9.

The result is that Adinkerke is home to a staggering 33 cigarette and tobacco shops: even a petrol station was converted into one, and stores which sell other items, such as tourist gifts or stamps, also sell tobacco.

On the day I visit, the Brits are there, as usual, their cars sporting GB stickers, their occupants emerging from shops with large cartons of cigarettes.

Most are doing nothing wrong: British Customs, acting under European Union guidance, allow people to bring home 3,200 cigarettes and three kilos of tobacco per trip, recently increased from 800 cigarettes and one kilo. Assuming a smoker is on 20-a-day, that supply could last up to six months.

However, Customs officers and tobacco industry investigators say a significant number of people from the North-East make frequent journeys then sell tobacco on once they get home - and that is illegal. Contraband boxes of 20 cigarettes are going for about £2.60 in the region.

Bob Fenton, security liaison manager for the Tobacco Manufacturers' Association (TMA), speaking during our trip to Adinkerke, says: "For some people, it is a business. They can buy cigarettes and tobacco on the Continent and sell them in the UK, saving their customers 50 per cent and still making a profit for themselves.

"The problem is that it is so easy: all people have to do it catch the ferry to Calais, or take the tunnel, and once they arrive in France, they can be in Adinkerke in 45 minutes.

"The association does not have a problem with people bringing products back for personal use. We have no argument with people's personal entitlement - everyone has rights - but we are concerned about those who are abusing the system."

As we make the short journey from the ferry at Calais to Adinkerke, across the unmanned Belgian border, he points out old UK-registered cars, one of the tell-tale signs of smuggling.

Smugglers use them because Customs Officers now routinely seize their assets and traffickers were losing expensive cars: clapped-out bangers are no real loss to them.

THOSE flouting the law are abusing a business which is entirely lawful. Kathy West, and daughter Katie, are Londoners who run the English Tobacco Company in Belgium, part of the Eastenders business, which also sells cut price alcohol in Calais, once again because taxes are lower in France.

They have a cigarette and tobacco shop just off the main street in Adinkerke and Mrs West and her daughter confirmed that a large proportion of their customers are from the North-East. Some, they say, even come on organised coach trips to see the war graves and stop off to stock up on cigarettes and tobacco.

A lot of the North-East customers come for brands which are big sellers in the region, primarily Regal and Lambert & Butler, and owner Mrs West said she understood the plight of North-East traders who cannot compete.

However, she says that she is simply taking advantage of a business opportunity, adding: "We really took off when the border controls were lowered within the EU in 1993. It is very big business. We do have sympathy with the shopkeepers in Britain. It is a terrible situation, but what is the point of being in the EU if there is not an open market?".

And she bristles at any suggestion that any of her customers are involved in smuggling, saying: "This is a legitimate business. Our customers know what they are allowed to take back."

Daughter Katie, 28, the manager, said some customers were concerned about counterfeit cigarettes. British Customs estimate that 80 per of smuggled cigarettes in the UK come in freight containers organised by criminal gangs and that a sizeable proportion are counterfeited in countries like China, using inferior and dangerous substances and methods.

Miss West says: "A lot of our customers come to Belgium because the prices are lower, but also because they know what is in our cigarettes. They know they are the real thing,"

Both mother and daughter acknowledge that, for all they are a legitimate business, they have no control once the cigarettes leave their shop.

"If our customers choose to sell them on once they leave us, then that is nothing to do with us," says Miss West.

And she is right. Bob Fenton, of the TMA, says: "This situation has been created by the differential in taxes, which means it is much cheaper in places like Belgium."

Cynics might argue that the Government wishes to retain the status quo because it makes plenty of money from taxes on tobacco products - something it denies, citing the need instead to reduce smoking for health reasons.

But even if the reason was to make money for the Treasury, organisations like the TMA and the Tobacco Alliance, which represents 21,000 small shopkeepers nationwide, point out that the Chancellor is missing out on £3.5bn a year in tax not paid on black market cigarettes.

And the Alliance disagrees with those who say that a crime against the Government is a crime without a victim. It points out that each batch of cheap cigarettes, whether smuggled or legitimately brought in, hits corner shops through lost sales of a product on which many of them rely to survive.

John Abbott, a Darlington shopkeeper who is regional spokesperson for the Tobacco Alliance, believes the only way to eradicate the trade is to reduce British tax in line with the Continent, and also cut the amount people can bring in, saying that 3,200 cigarettes and three kilo of tobacco a trip is far too high.

It creates a situation which is damaging even before smuggling is taken into account, he says, adding: "The allowance is too high because it encourages people to make two trips a year and legitimately evade UK taxes. If we are all part of the EU, why do cigarettes abroad cost less? The Government's heavy taxation on the product to deter people from smoking by making it cost prohibitive, encourages them to seek other markets elsewhere, and we are losing our customers through the door."

And for each corner shop that closes, a whole community becomes the victim.